Swedish telco Tele2 has agreed to buy local cable operator Com Hem in a merger agreement that will establish Tele2 as a major integrated mobile and fixed line operator in Sweden.
Tele2 will absorb Com Hem in a deal that was described by the firms as a “natural next step for both companies”. The agreement values Com Hem at some SEK 26.0 billion (€2.65 billion).
The merged company will be the second largest mobile telephony and fixed broadband provider in Sweden behind state-owned Telia. However, Tele2 and Com Hem claim it will be the market leader in digital TV, meeting the fixed and mobile data consumption needs that underpin today’s accelerating demand for video.
“Merging is the best possible next step for both companies as it will enable us to meet the demands of tomorrow and unleash the power for the best possible digital quality of life in Sweden,” said Com Hem CEO Anders Nilsson.
Tele2 CEO Allison Kirby said: “This transaction will make Tele2 stronger, more diversified in its home market, and better equipped to fearlessly liberate people to live a more connected life.”
On completion of the deal Com Hem CEO Anders Nilsson will become the CEO of the enlarged Tele2 and assume leadership of the Tele2 management team. Tele2 CEO Allison Kirkby will step down from her position at that time.
Com Hem chairman Andrew Barron along with at least one additional Com Hem board director is expected to join the Tele2 board, which will be chaired by Tele2’s proposed new chairman Georgi Ganev.
The deal was supported by investment company Kinnevik, which is the largest shareholder in both Tele2 and Com Hem, holding 30.1% of the shares and 47.6% of the votes in Tele2 and 18.7% of the shares and votes in Com Hem.
On completion of the deal, Kinnevik will become the largest shareholder in the combined company, holding 27.3% of the shares and 41.9% of the votes.
“TMT is a sector in rapid change with customers seeking seamless connectivity and digital services, and we believe Enlarged Tele2 will be in a strong position to meet those demands,” said Georgi Ganev, who is CEO of Kinnevik as well as Tele2’s proposed chairman.
Tele2’s offer values Com Hem at SEK146.00 per share, representing a premium of 15.9% compared to the last thirty trading days and a premium of 11.8% compared to the last closing price of SEK130.60 on January 9, 2018.
Com Hem’s shareholders will receive SEK 37.02 in cash plus just over one share in Tele2 for each share in Com Hem outstanding at completion of the merger. This means Com Hem’s shareholders will receive approximately 26.9% ownership in the enlarged Tele2 and a total cash consideration of SEK 6.6 billion.
The economic ownership and total cash consideration are calculated based on the 178,135,344 outstanding Com Hem shares, excluding any shares held in treasury, as of January 9, 2018.
The agreement marks the latest consolidation among mobile and fixed operators in Europe, with T-Mobile Austria agreeing last month to buy Liberty Global-owned cable operator UPC Austria for an enterprise value of €1.9 billion.
The Tele2-Com Hem merger is subject to regulatory approval by the relevant competition authorities and is expected to close during the second half of 2018.
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22nd February 2019